Romans fact-checks Trump's economy claims

CNN's Christine Romans breaks down what factors are boosting economic growth under President Trump and whether or not they are sustainable.

Posted: Aug 2, 2018 7:09 PM
Updated: Aug 2, 2018 7:09 PM

For years, many Republicans and anti-tax advocates have pushed for a change to the way that investment taxes are calculated.

They may get their wish. Steven Mnuchin told the New York Times that the administration is considering whether it can use its regulatory powers to let investors account for the effect of inflation when calculating how much their investments have grown. Treasury is evaluating the economic impact and the process through which it can be achieved, according to a Treasury spokesperson.

When investors sell stocks or other assets subject to capital gains, they are taxed on the difference between what they receive for the sale and what they paid for it originally. That tax rate is usually 20%, which is lower than the rate people are taxed on their income.

By adjusting capital gains to adjust for inflation, the White House could cut the tax bills for the nation's wealthiest investors by billions of dollars a year.

For example, if an investor bought $100,000 of stock in 1987 right after the stock market crash that year, that stock could easily be worth about $1.4 million today. The tax would be calculated on the $1.3 million gain, which would mean the investor would owe more than $250,000 in capital gains taxes if he or she sold the stock. But adjusting for inflation, a process known as indexing, the original $100,000 cost of the stock would be estimated to be more than $200,000, saving the taxpayer more than $20,000 in taxes.

All of those savings would add up. The lack of indexing increased tax collections by $34 billion in just the most recent fiscal year, according to an estimate cited by the Congressional Research Service.

The sale of stock that would otherwise not take place would lead to some increase in tax collections should indexing be put in place. But even with those additional sales, the net effect of indexing would be a $102 billion reduction in tax collections over a 10-year period, according to a study at the University of Pennsylvania Wharton School of Business.

That study estimated that 86% of that benefit would go to the nation's wealthiest 1%, with more than 60% going to the top one-tenth of 1%.

Households with income of more than $500,000 a year are in the top 1%, according to the IRS.

Larry Kudlow, who joined the administration as director of the National Economic Council in March, is a long-time advocate of the president taking unilateral action to index capital gains. And conservative groups such as Americans for Tax Reform led by Grover Norquist, also have long advocated presidential action to index capital gains. Mnuchin told the Times the Trump administration is considering whether to take unilateral action -- without waiting for Congress to act.

"If it can't get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we'll consider that," he told the paper.

But in 1992 the Treasury Department under Republican President George H.W. Bush looked at whether they had the power to index capital gains and decided it would take Congressional action to make the change. Although such legislation would have substantial support among Congressional Republicans, including by Kevin Brady, chairman of the House Ways and Means committee which writes tax bills, passing such a change through Congress could be extremely difficult since Democrats have enough seats in the Senate to block such a move.

Advocates of the change argue it would give a fresh jolt to economic growth by freeing investors to sell assets they are holding because of the tax bite they would face. But a report from the nonpartisan Congressional Research Service in July questioned that claim.

"It is unlikely, however, that a significant, or any, effect on economic growth would occur from a stand-alone indexing proposal," the group said in its report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 268672

Reported Deaths: 5917
CountyCasesDeaths
DeSoto18020198
Hinds17192342
Harrison14654214
Rankin11404225
Jackson11146194
Lee9160149
Madison8736173
Jones6934120
Forrest6324126
Lauderdale6212198
Lowndes5623124
Lafayette5295102
Lamar515565
Washington4984125
Bolivar4187111
Oktibbeha413686
Panola390784
Pontotoc383461
Warren3766103
Monroe3746112
Marshall362273
Union361966
Pearl River3578107
Neshoba3528160
Leflore3148110
Lincoln311489
Hancock304263
Sunflower296079
Tate282964
Alcorn276257
Pike275985
Itawamba272665
Scott268055
Yazoo259956
Prentiss257255
Copiah254649
Coahoma253656
Tippah252652
Simpson246072
Leake239367
Marion230774
Covington226173
Grenada225874
Wayne219337
Adams218172
George211041
Winston208971
Newton202748
Attala198265
Tishomingo197861
Chickasaw191546
Jasper185839
Holmes173268
Clay169538
Tallahatchie158835
Stone154727
Clarke151062
Calhoun143122
Smith134226
Yalobusha125435
Walthall116638
Greene115930
Noxubee114726
Montgomery113136
Lawrence109317
Carroll107722
Perry106431
Amite103829
Webster99024
Claiborne90426
Jefferson Davis90231
Tunica89722
Benton87423
Humphreys86225
Kemper81820
Quitman71611
Franklin71517
Choctaw64914
Wilkinson60325
Jefferson57521
Sharkey45917
Issaquena1616
Unassigned00

Alabama Coronavirus Cases

Cases: 449086

Reported Deaths: 7172
CountyCasesDeaths
Jefferson656061094
Mobile32260595
Madison28795237
Tuscaloosa21859277
Montgomery20388348
Shelby19707139
Baldwin17629217
Lee13482112
Morgan12795154
Etowah12265213
Calhoun11730228
Marshall10543133
Houston9221182
Limestone849485
Cullman8412143
Elmore8379123
Lauderdale8049121
DeKalb7985122
St. Clair7985144
Talladega6637114
Jackson611557
Walker6078185
Colbert5650104
Blount556895
Autauga549967
Coffee473471
Dale418692
Franklin380153
Russell364216
Chilton351379
Covington347986
Escambia343446
Tallapoosa3228111
Dallas3164105
Chambers313775
Clarke311139
Pike269435
Lawrence259759
Marion256667
Winston236443
Bibb226151
Geneva217151
Marengo213332
Pickens203031
Barbour189840
Hale189748
Fayette183534
Butler176660
Cherokee167333
Henry162229
Monroe154221
Randolph149536
Washington144727
Clay131650
Crenshaw127048
Macon124638
Cleburne124128
Lamar122024
Lowndes118637
Wilcox110022
Bullock107429
Perry100819
Conecuh99123
Sumter91228
Greene78624
Coosa66119
Choctaw52424
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